Just like any other new business, fledgling crypto brokerages, exchanges, and other companies handling assets related to crypto activities need a banking relationship. Though many  enthusiasts hope that decentralized blockchain technology will lessen or even eliminate reliance on central banking systems in the long run, for virtually all crypto operations  now, these relationships are essential, providing everything from safe and interest-bearing storage of assets to lines of credit for business expansion. As such, there is still need to seek out banks for crypto companies.

Why Are Banks are Reluctant to Back Crypto?

Many new and existing enterprises have to ask themselves continually what banks for crypto companies will suit them. Crypto companies need banks–but are banks cooperating?

The relationship between banks and crypto is historically complicated and often fraught. Major financial institutions have recognized the inherent promise of blockchain technology for international payments and other important banking functions. At the same time, many banks not only refuse to accept crypto or work directly with crypto-related companies but also place restrictions on their customers (e.g., many major banks banned crypto purchases on credit cards in early 2018). Bank stances on crypto appear to be constantly evolving and sometimes contradictory: JPMorgan chair Jamie Dimon famously called Bitcoin a “fraud” in 2017, but his company also broke new ground in 2019 by launching their own fiat-backed stablecoin, JPM Coin, in 2019.

Banks’ reluctant stance on crypto business means they have some willingness to work with hedge funds and well-established ventures who have plenty of capital for them to charge excessive fees due to the high risk nature of the digital asset space. However, younger companies with a much more immediate connection to crypto, such as exchanges and crypto-centered brokerages, have a much harder time establishing banking connections.

Why are so many in the banking industry hesitant to embrace crypto?

The answer depends on who you ask. Banks have cited many practical obstacles to crypto implementation. Legally required KYC/AML procedures for new clients look different from fiat procedures when it comes to tracing crypto funds and can sometimes be more difficult due to many blockchains’ deliberately privacy-protecting design. Complications from frequent cross-border transactions are another variable that banks point to when citing a reluctance to work with a potential new client.

Though Bitcoin and other cryptos have a large and constantly growing mainstream user base, its historical association with illegal ventures such as the Silk Road drug market can make KYC/AML seem even more intimidating. The SEC and FINRA have cracked down on coins acting as unregistered securities, increasing banks’ regulatory concerns. Market volatility is also a major concern, with many banks justifying their credit card crypto purchase bans with fears that too many card users may default on their credit cards after “gambling” on crypto prices.

Beyond practical concerns, some banks fear an existential threat to the modern banking system from crypto–the exact threat Satoshi Nakamoto predicted in 2008 when he described electronic cash payments that went from peer to peer “without going through a financial institution.”

Despite all these practical concerns and existential fears, it’s not all doom and gloom when it comes to a positive and mutually beneficial relationship between banks and crypto companies. While many institutions are starting to launch their own crypto and blockchain enterprises, some banks have gone further embracing crypto by directly supporting crypto companies and traders. These banks recognize that cryptos, like any other young asset class, experience volatility and require adaptation–but it’s far better to lead the way forward for banks handling funds resulting from engaging in a business surrounding digital assets than to resist change and get left behind.

Who are some of these banks willing to work with crypto-oriented companies? Let’s take a closer look:

Silvergate

Founded in 1988, Silvergate is much older than blockchain based technologies, but this Southern California-based bank is also unquestionably a crypto leader. Since launching its crypto division in 2013, Silvergate has developed a slew of crypto-oriented banking services for exchange operators, trading funds, and fintech developers. Silvergate Capital has seen tremendous growth since it first went public in 2019.

Their Silvergate Exchange Network (SEN) enables real time settlement of fiat transactions between Silvergate clients. The bank also offers a pilot Bitcoin margin lending service and is laying groundwork for crypto custody solutions. Silvergate has stayed profitable and actively grown through volatile crypto market cycles by adopting a conservative financial stance, maintaining a 26% ratio between total capital and risk-based assets while other banks adopt a 12-14% rate.

Though a leader in crypto banking, Silvergate is still much smaller than institutions such as JPMorgan, a fact they exploit by capping their assets under management below certain regulatory thresholds to avoid lending limits. While all of these facts make Silvergate a top-tier crypto banking option, they’re also one of the hardest banks to join as a new client, requiring high initial deposits and laborious screening procedures.

Signature Bank

New York-based Signature Bank has made less effort than Silvergate to publicly brand themselves as “crypto bankers”, but their Signet Network still makes them stand out in the crypto space. Signet is a blockchain-based payments platform launched in early 2019, much earlier than similar platforms launched by more institutional banks. As of April 2021, Signature has decided to join Silvergate in offering bitcoin backed loans.

Other crypto services Signature offers include a real estate security token platform and a partnership with settlement platform Prime Trust to offer blockchain-backed, real time payments at an institutional level.

Signature is extremely selective about their client base and largely favors institutional funds who can meet strict compliance standards and regularly transfer $50k or more at once. Even Signet, which attracts smaller and less established exchanges and market makers, requires a minimum account balance of $250k. Retail investors are also out-of-luck when it comes to Signature, as they don’t allow FBO (For Benefit Of) accounts.

Metropolitan Commercial Bank

Silvergate and Signature are great for institutional clients with lots of assets under management–but what about smaller crypto companies and startups, whose need for banking services might be even more pressing? Metropolitan Commercial Bank has a reputation for being more receptive to these kinds of banking clients.

Their deposit requirements are far more achievable for smaller companies, though perks such as business debit cards are reserved for larger clients. Retail investors still should look elsewhere for crypto banking services, as they also tend to avoid FBO services. But if you’re looking for a relatively inexpensive bank to host an operational account for your digital asset-based business, MCB is a great place to start.

BCB Group

Thanks in large part to an attentive customer service team, crypto-focused BCB group is often cited as one of the best user experiences out there for crypto banking clients. They support 23 different fiat currencies, host FBO accounts for retail exchanges, and can even hold custody of major cryptos and stablecoins. The UK-based company has received regulatory approvals in both the UK and Switzerland, making them a good option for transactions between pounds sterling and major cryptos.

Their monthly maintenance fees are non-trivial, but clients can make up the difference through their reasonable transaction fees, an uncommon feature in the digital asset banking space. They are also one of the best in the business when it comes to technology, with a robust API suitable for brokerages and exchanges to handle direct deposits and withdrawal requests.

Blockchain Venture Studio

If you’ve been asking yourself what banks for crypto companies will offer their services to you, you aren’t alone. Banking services have been hard to come by for crypto companies, but that’s rapidly changing–thanks more to banks who have embraced crypto clients than banks who have only recently made grudging institutional concessions to the crypto era. For many smaller exchanges and companies, BCB Group stands out for its customer experience and its openness to diverse new business.

Getting access to the banking services you require for your crypto or fintech company is one thing, but how about scaling said company?

TechMeetsTrader has helped many blockchain or crypto companies make the most of their position and timing in the market. Leverage our experience and allow us to utilize a wealth of strategies to help increase your market foothold and grow.

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